FACTA Prescreen Rule

The Credit Union National Association (CUNA) is pleased to respond to the Federal Trade
Commissions (FTCs) proposed rule that will require entities making prescreened offers for credit
or insurance to provide enhanced disclosures regarding the consumers right to decline, or "opt-
out" of, receiving such offers in the future. These disclosures will replace the current
disclosures now being used to comply with the existing provisions of the Fair Credit Reporting Act
(FCRA) and will implement the Fair and Accurate Credit Transactions (FACT) Act provisions that
direct the FTC to issue a rule to make these disclosures simple and easy to understand. By way of
background, CUNA is the largest credit union trade association, representing approximately 90% of
our nations nearly 9,300 state and federal credit unions.

Summary of CUNAs Position

CUNA supports enhanced disclosures. However, we do not believe it is necessary to have
both a short and long notice regarding the consumers right to opt-out of receiving prescreened
offers.

If a short notice is required, the FTC should allow flexibility with regard to the 12-point
type size requirement and permit slightly smaller type.

If a short notice were required, the proposed rule would require that it be on the first page
of the "principal promotional document." We believe it would be helpful to define this term. For
electronic solicitations, there should be clarification regarding the requirement that the short
notice be on the "first screen" in order to address situations in which consumers may need to
scroll down the first page in order to view the opt-out notice.

For electronic solicitations, the rule should clarify that any type size requirement for the
opt-out notices should refer to how the information is transmitted by the lender, not how it
appears on the consumers computer.

The effective date of the rule should be six months after the final rule is issued.

Discussion

CUNA supports the intent of the proposed rule to improve the required notice to consumers
regarding their right to opt-out of prescreened solicitations for credit or insurance. However, we
have concerns regarding the "layering" approach outlined in the rule, in which there would be a
"short" notice highlighting the opt- out right, followed by a subsequent "long" notice within the
solicitation that provides additional information.

We do not believe the layering approach would be appropriate in this situation because the long
notice would only be required to include a limited amount of additional information than would be
provided in the short notice. Under these circumstances, the "long" notice would still be
relatively short and would not be very much longer than the "short" notice. Since both notices
would be relatively short and would include similar information, the result would be two redundant
notices within these solicitations.

We believe the redundancy between the short and long notice can be eliminated by requiring only
one notice, such as the long notice, which succinctly includes all the information currently
required under the FCRA. The proposed long notice would be a simpler and an easier to understand
version of the current language that is used to disclose the required information. We also agree
that this notice should be in a location within the solicitation that the consumer is likely to see
and that each organization should be allowed to place their notices in a manner that it believes
best highlights the information.

One example for the location of the notice could be within the information that includes the
rates, terms, and other conditions, consistent with the example included in the proposed rule
regarding the placement of the long notice. To the extent consumers open and review these
solicitations, they are likely to see this portion of the solicitation, as well as the cover
letter. We believe this approach will fulfill the requirement of the FACT Act that these notices
be "simple and easy to understand."

The proposed rule would require that the short notice be placed on the page first seen by the
consumer, but this will not necessarily guarantee that the consumer will grasp its significance.
For example, a consumer interested in the offer may very easily skim or skip over the cover letter
and would almost certainly review the rates and terms portion of the document in order to decide
whether to accept the offer. At least under these circumstances, one could argue that a notice in
the rates and terms portion of the document would attract more attention than if the notice was
placed on the first page of the cover letter.

If the FTC requires a short notice, along with the long notice, we request additional
flexibility regarding the requirement that the short notice be no smaller than 12-point type. We
suggest the FTC incorporate the approach the Federal Reserve Board adopted with regard to type size
for credit card solicitations. The disclosure requirements for credit card solicitations and
applications under Regulation Z, the Truth in Lending Act, suggest, but do not require, that a
significant portion of these disclosures be in 12-point type. These rules specifically permit
slightly smaller type, while indicating that disclosures appearing in less than 8-point type would
likely be unacceptable.

We believe the FTC should adopt a similar approach with regard to the short notices. There are
a number of ways, such as changes in font and color, bolding, or italicizing verbiage, that an
organization may structure a promotional document to call attention to particular information. We
believe each organization should be allowed to draft their notices in a manner that best highlights
this information within the broader context of their promotional documents.

If the FTC requires a short notice, the rule would require that this notice be on the first page
of the "principal promotional document." We believe it would be helpful to define this term. This
term could be defined as "the document intended to be seen first by the consumer."

For electronic solicitations, we also believe there should be additional clarification regarding
both the requirement of 12-point type for the short notice and 8-point type for the long notice.
The type size appearing on one computer may appear as a different size when viewed on another
computer, and lenders have no control over these computer settings. To resolve this issue, the
rule should clarify that the information must or should be "delivered or transmitted" in 12 or 8
point-type size, as opposed to the requirement that it "be" in 12 or 8 point-type size. Lenders
should only be responsible for how they transmit the information, not how it appears on the
consumer's screen.

For electronic solicitations, the rule would require that the short notice be placed on the
first "screen" of the solicitation. We believe this should be clarified to require that it be on
the first "page" of the electronic solicitation. Otherwise, there would be confusion as to whether
the proposed requirement would cover situations in which the consumer would need to scroll down the
first page in order to see the notice. Similar to controlling the type size that appears on the
consumers computer, the lender cannot control what appears on the first screen of the consumers
computer without requiring the consumer to scroll down further in order to see the notice.

The proposed rule establishes an effective date that will be sixty days after the rule is issued
in final form. We do not believe this will be a sufficient amount of time. We believe the optimal
effective date should be six months after the rule is issued. Smaller financial institutions, such
as credit unions, do not have the same level of resources as larger institutions to prepare for
these changes, and we believe this justifies a further delay of the effective date.

Thank you for the opportunity to comment on the proposed rule regarding the disclosures in
connection with prescreened offers for credit or insurance. If you have questions about our
comments, please contact Senior Vice President and Associate General Counsel Mary Dunn or me at
(202) 638-5777.